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Life Health > Health Insurance

The Easy Fruit In Worksite Sales May Have Been Picked

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Many large employers appear to have reached the saturation point with employee benefits, and the days of easy pickings in selling voluntary worksite products may be over, industry experts believe.

Case in point: Among 60 worksite carriers surveyed by Eastbridge Consulting Group Inc., Avon, Conn., new sales in 2004 were up just 3% over the year before, to $4.2 billion.

It was the second year in a row Eastbridge found new sales below the double-digit growth rate it had found in earlier surveys.

Another study of 30 carriers by LIMRA International, Windsor, Conn., found sales of two popular worksite benefits were actually down from last year.

LIMRA’s survey, covering the first three quarters of 2005, showed sales of permanent term life and accidental death and dismemberment down 2% and 4%, respectively, from a year earlier. This was after LIMRA’s 2004 survey found sales for those products virtually flat.

The problem may be simply one of oversupply, says Ron Neyer, a LIMRA analyst. Large employers in particular may feel they offer as many voluntary benefits as they can carry.

“If anything, they may be changing carriers, but they have not been offering new benefits,” Neyer says. “The opportunities now appear to be with small employers, those with under 20 workers. A number of carriers now are looking in that market.”

Another factor in the slowdown is the fast rise in the cost of health care, which made some employers leery of bringing in new benefits, even employee-paid ones.

One bright spot LIMRA found was critical illness insurance, which was up 49% in sales volume. Neyer cautions, however, that growth largely reflected a big market push by a few big carriers.

Short-term disability and accident insurance sales were up marginally–2% for STD and 5% for accident.

Although the figures add up to a lackluster year, Neyer points out that double-digit growth rates can’t be sustained indefinitely. Even with a little slippage, voluntary benefits remain at a healthy level, considering the strong growth from 2000 to 2003.

In that period, new worksite benefit sales rose from $3.1 billion to $4.1 billion, while in-force premiums climbed from $8.8 billion to $15 billion, according to Eastbridge.

Another point to bear in mind is that LIMRA’s survey does not include some leading worksite vendors, most notably the largest one, Aflac Inc., Columbus, Ga. That company made a major recovery from an uninspiring 2004.

Aflac took a step back last year due to a reorganization of its sales force. But in the third quarter of this year alone, it reported U.S. premium income up more than 10% over 2004, to $820 million.

Total new annualized premiums rose 10% to $297 million in the quarter, in part because of a successful launch in July of a new vision care product. Sales of that plan, Vision Now, exceeded $8 million by the end of September, well above company expectations, says an Aflac spokeswoman.

For the first nine months, Aflac’s premium income rose 10.5% to $2.4 billion. Total new sales rose 5.6% over a year ago, to $890 million.

Like Aflac, other worksite carriers exceeded the average. For instance, although sales at the top 10 worksite companies covered in the LIMRA survey were down, the remaining 20 on average saw sales increase, Neyer notes.

Looking to next year, one benefit that may see sales growth is the so-called minimed plan, he says. In fact, a number of carriers already are starting to market these more aggressively.

Unfortunately, one reason for the growth is conventional health care insurance sales are down, Neyer observes.

Minimed policies generally aim to cover part-time workers or full-timers whose employer can’t afford a major medical plan. Typical policies cover no more than $5,000 to $10,000 in annual health care costs.

The big surprise for worksite sales this year was the number of large carriers entering the small group market, Neyer says. Currently, 70% of worksite carriers are in that market, and Neyer expects that trend to continue next year.

Preliminary results of a LIMRA survey of producers to be released next year show many are optimistic about sales growth in 2006, Neyer says. They were particularly positive in expectations that employee participation and customer service would improve.

Overall, producers appear to be satisfied with the business. “There were no red flags about moving away from worksite selling,” Neyer says.

The problem may simply be one of oversupply, particularly among large employers


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